Permanent establishment attribution limits taxation to profits attributable to the PE under arm's length principles and allowed deductions. Profits are taxable only in the State of residence unless an enterprise carries on business in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attribution follows the arm's length approach as if the permanent establishment were a distinct and separate enterprise; deductible expenses incurred for the permanent establishment are allowed; customary apportionment methods are permitted if consistent with the Article; mere purchases do not give rise to attributed profits; and the attribution method should be applied consistently year to year.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Permanent establishment attribution limits taxation to profits attributable to the PE under arm's length principles and allowed deductions.
Profits are taxable only in the State of residence unless an enterprise carries on business in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attribution follows the arm's length approach as if the permanent establishment were a distinct and separate enterprise; deductible expenses incurred for the permanent establishment are allowed; customary apportionment methods are permitted if consistent with the Article; mere purchases do not give rise to attributed profits; and the attribution method should be applied consistently year to year.
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